Most internet companies were based on the idea of network efficiency, operating at a loss for a period of time to build market share with the assumption this would eventually lead to profitability. This idea was summed up in the moto "get big fast." Belief in the internet was so powerful that companies were able to cause a jump in their stock price by adding a ".com" suffix or "e-" prefix, which came to be known as prefix investing. This fervor led to a spike in speculation, where investors would buy stocks at high prices, anticipating further increases in stock prices and profits from reselling at a later date. This led to a
In reality, very few of these companies were successful. Many failed to accumulate enough users, and even many that did failed to turn a profit. This led to the collapse of the bubble, where investors stopped buying dot-com stocks at increased prices, leading to those holding them attempting to sell them, which crashed the stock price. Many companies lost more than half their value, and some, such as pets.com, had their stock price fall by more than 80%. Some companies were able to survive these massive losses, and some were even capable of eventually surpassing their dot-com heights, such as e-bay or Amazon. Many company executives were accused of fraud for mishandling the money of their shareholders. It also crashed the stock market at large, with the NASDAQ dropping 78% as a result of the bubble popping.
.com brought about the most common form of internet addresses and this was a good article about that. It is really unusual that so many sites and stocks failed even in this boom.
ReplyDeleteIt's interesting to find out how only a few of the companies were successful- I always thought that the dot com boom created/boosted many prosperous companies. The fact that many companies failed to accumulate enough users might have been due to the fact that the success of internet companies led to the creation of too many of them.
ReplyDeleteI find it interesting to read about how the internet came to be. The dot com boom reflected investors' overconfidence in the future popularity of the internet at a time when the internet is increasingly ubiquitous.
ReplyDeleteIt's interesting to learn about the emergence of .com – it brought about huge growth in the world wide web and changed everything. It's so odd to hear that it caused such a big crash in the stock market and that only some companies were able to survive these losses.
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